With oil spewing into the waters off the Gulf Coast for more than three months, the need for alternative sources of energy is clear. And, as buildings are one of the largest consumers of energy, the industry is upping its ante in terms of exploring new innovations in the field of renewable sources.

“On average, the electric grid is 30 percent to 35 percent efficient. Between the coal at the plant and the light that you turn on, you’re really only using 30 percent of that electricity,” notes Jon Jensen, technical consultant for MaGrann Associates, a Moorestown, N.J.-based residential energy and green building consultant. “If we have wind and solar generating electricity right next door to where it’s being consumed, you cut out a lot of the losses associated with traditional consumption,” he adds.

Armed with a long list of incentives and policies for the use of such sources, many developers are looking into solar energy in particular, taking advantage of such programs as the 30 percent federal tax credit set to expire on Dec. 31 of this year. Meanwhile, other forms of alternative energy are being looked into, though they are less common mainly due to the lack of incentives offered.

Solar savings and payback

“If you’re going to be in the build-and-hold position, you know you’ll pay for common area electric bills as long as you own the property,” notes Jensen. “Because buildings are longer-term investments … the solar option for offsetting common area electric consumption becomes much more attractive.”

What’s more, energy costs are on the rise, and will only continue to increase. “If you do any sort of financial payback procedure, it’s standard to use today’s utility rates, but … we expect energy prices to rise, and that’s one of the best reasons to start to get control of energy costs right now,” says Jensen.

Savings from solar panel installations can be immediate and long-term, particularly “if you can harvest the low-income housing tax credit and solar tax credit and rebate,” according to David Potovsky, project developer at Borrego Solar Systems. Potovsky notes that the systems are built to offset the common load, providing savings to the bottom line. A 50-kilowatt system, for example, which can cover the roof of a 50- to 60-unit building, is projected to save between $12,000 and $15,000 annually.

Meanwhile, the payback for solar hot water systems is about eight years, according to Deni Adaniya, associate director of housing development, Resources for Community Development, whose California projects that have come online in the last five years all include either a photovoltaic (PV) system or a solar thermal hot water system. (California’s MASH, or Multifamily Affordable Solar Housing, program provides many incentives on qualifying projects.) PV electric systems offset the common area load, while solar thermal systems benefit the residents directly and can provide 100 percent of the units’ heat and hot water.

And, Adaniya points out, developments that include several smaller buildings spread over the site, compared to one single building, appear to have a bigger savings. At Fox Courts, for example, a single-building, 80-unit development, the panels offset 45 percent of its common area load, while at Los Medanos Village, a seven-building, 71-unit development, the panels are projected to offset 88 percent to 90 percent of the common area load.

“These various solar systems make sense installing on a per-property basis, as opposed to wind or geothermal,” reports Adaniya. “There are multiple levels of incentive programs from the local, state and federal governments that promote solar, so the dollars and cents just make a ton of sense to us.”

The systems themselves can be expensive, though, which is why it’s important to leverage the incentives offered. Many developers report that without these incentives, making solar pencil out would be extraordinarily difficult. “The cost of the system isn’t [yet] down to the point where it makes sense solely on producing the electricity,” notes Ed Walters, Jr., founder and partner of The Walters Group, which recently completed New Jersey’s first LEED Gold-certified, affordable housing community, Stafford Park Apartments, part of a 370-acre mixed-use project.

The overall renewable energy effort at Stafford Park included solar and wind energy, although the latter is still under consideration. Solar panels, however, have been installed on all rooftops to supply electricity to the building’s common areas. Currently, the development has five separate solar systems that provide 183 kilowatts of power to the common areas, or 20 percent of the overall load.

Up next for The Walters Group is a 216-unit market-rate community, which will include an adjacent 6.5-megawatt solar farm in what was once a landfill. Not only will the farm provide energy to the common areas, but it will also supply electricity to the submetered apartments. The solar array, which will be the largest in the state, will include approximately 26,000 solar panels and has an expected ROI of six to seven years.

In addition to the federal rebate, many states and localities also offer incentives for solar panels. New Jersey, for example, offers an SREC (solar renewable energy credit) for real estate developers, explains Walters, through which every kilowatt-hour produced by solar energy receives a credit that can be traded. The utility company can either pay for the electricity it sells or can buy the credits from those producing their own energy. The solar alternative compliance payment (SACP) is currently $675, with each SREC trading for $650, so it’s beneficial for the utility to purchase the credits. (Visit www.dsireusa.org for a comprehensive list of local and state incentives.)

As the cost of electricity continues to increase and more people purchase solar panels, the cost per panel is likely to decrease, while the technology improves and the amount of electricity produced by each panel increases, predicts Walters. According to a Research and Markets report, photovoltaic production has been increasing by approximately 48 percent every year since 2002.

“The SREC program anticipates that this is happening, so every year the SREC and penalty payment that companies have to pay lowers by 3 percent,” notes Walters. By the time the 15-year program ends, SRECs will be less valuable, which should coincide with less expensive and more efficient panels. At that point, “you’ll be able to afford to purchase them solely on the benefits of producing electricity,” Walters predicts.

Meanwhile, solar panels are already becoming more accessible, as new products from SoloPower, a producer of thin-film PV cells and modules, indicate. The company offers a 13-pound, 260-watt panel (pictured), for example, which is easy to install due to its flexibility and capability of laminating directly to a roof. Such a product enables developers to install solar panels to a roof that wouldn’t traditionally be able to bear the additional weight, points out Tim Harris, CEO of SoloPower.

As Potovsky notes, though, many states stipulate that a building’s system needs to be efficient to start; in California, for example, to receive an affordable housing rebate on solar panels, the project needs to first exceed Title 24 standards by 15 percent.

“Once you attend to HVAC and envelope and lighting, then the progression to solar and wind [energy] is a movement that I fully support,” notes Jensen of MaGrann Associates, which worked with The Walters Group on Stafford Park Apartments.

Other alternative energy sources

Wind power has had a much more difficult incentivizing process than solar power, making it less common at this point in time. “The cost to install a wind turbine far exceeds the benefits of supplying the electricity,” Walters points out. Cost is not the only factor, though; wind has proven much more difficult to harness. Another obstacle for wind power is the mere fact that the windiest months occur during the winter, when electricity usage is down 50 percent to 60 percent, Walters adds.

Perhaps the greatest challenges for wind, though, are the location of utility grid resources and permitting, suggests Jensen. Because wind turbines are more visible to the public than are solar panels on a roof, the former likely will have to overcome more protest from local municipalities.

Meanwhile, fuel cell technology, which combines hydrogen fuel and oxygen to produce heat and water, was recently introduced into multifamily development at Becker + Becker’s 360 State Street in New Haven, Conn. The first large-scale residential installation of such technology, the 400-kilowatt cell is expected to provide combustion-free power to the common areas and retail spaces of the building, or about 50 percent of its energy load.

“The economics for the fuel cell have recently [made it] more affordable” to install them into large multifamily communities, explains Bruce Becker, AIA, AICP, president, Becker + Becker, adding that as the units have become more efficient, there is less maintenance, and subsidies, including a 30 percent tax credit, have become more established, all of which have contributed to a greater financial payback on what many may deem an expensive technology. (At 360 State Street, hard and soft costs for the equipment and labor totaled over $4 million.) Becker also cautions that fuel cells can provide some regulatory challenges, since not all states allow submetering.

“Most states have net metering regulations that allow you to sell power back to the grid when you produce more than you need, and to net out your production from your consumption,” Becker notes. “I’m optimistic that you’ll see more and more fuel cells in multifamily buildings,” adding that it does not make sense to install in smaller-scale projects.

At the same time, Michelle Lauterwasser, an associate at Becker + Becker, which has an ownership interest in the New Haven development, contends, “the biggest challenge setting up [the fuel cell] … is getting through the regulatory process, trying to figure out where the power goes, how it will be metered and if the excess will go back to the grid—if we have to curb usage.”

Meanwhile, cogeneration, though not technically a renewable resource, is another technique to consider. “It’s a strategy whereby traditional fuel is consumed on-site, primarily for the generation of electricity. But whenever any fuel is consumed in order to generate electricity, there tends to be considerable waste heat,” says Jensen. “That can be useful for meeting the domestic hot water demand or space-heating loads.”

While some institutional operators have found this to be cost-effective, Jensen says the problems are lack of awareness and an unclear relationship with the utility grid to ensure the utility is cooperating with distributed generation. If a central system does not exist, however, this technique would be difficult to implement in multifamily developments.

“There are more central systems in retrofits, so it may be more commonly implemented in a retrofit application,” says Jensen. “But if you can design it into the project from the start, you’ll have an easier time making it have an attractive, simple payback.”